If Management and Salespeople Are Compensated on the Basis of Achieving

question 10

Multiple Choice

If management and salespeople are compensated on the basis of achieving high sales targets,there is increased incentive to record sales before they have been earned.In such a situation,the auditor will increase the extent of testing for which of the following transaction-related audit objectives for sales?

• A)cut-off and classification
• B)classification and occurrence
• C)occurrence and cut-off
• D)completeness and cut-off

---

Definitions:

Logic

The systematic study of correct reasoning and inference, often applied in computing to carry out processes based on conditions and rules.

Efficient Market Hypothesis

A theory that suggests market prices fully reflect all available information, making it impossible to consistently achieve higher than average returns.

Random Walk

The hypothesis that stock market prices evolve according to a random path, making it impossible to consistently predict their future direction.